[PPT] - New New Mex exico Lotter ery Au Authority For or Legis islati PowerPoint Presentation

SLIDE 1

New New Mex exico Lotter ery Au Authority For

r

Legis islati tive Fin inance Committe

mmittee

October 31, 2014

Mission Statement

Maximize revenues for education by conducting a fair and honest lottery for the entertainment of the public.

New Mexico Lottery Authority 4511 Osuna Rd. NE Albuquerque, NM 87109 Or Mailing P.O. Box 93130 Albuquerque, NM 87199-3130 505-342-7600 1-800-642-6689

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FY 2015 FY 2014 Original Annual Budget* Consolidated Income Statement** NET SALES Instant ticket sales $ 71,893,000 $ 69,804,813 Powerball sales 37,859,200 34,027,555 Mega Millions sales 8,994,900 13,410,732 Roadrunner Cash sales 6,992,800 8,592,684 Monopoly Millionaires' Club sales*** 2,992,800

Hot Lotto sales

4,988,800 5,700,311 Pick 3 sales 4,195,700 3,828,187 Lucky Numbers Bingo sales*** 3,396,300

Quickster sales

1,498,500 638,322 Retailer fees 12,000 22,453 Bad debts (24,000)

Total operating revenues

142,800,000 136,025,057 NON-OPERATING REVENUES Interest income 24,000 18,753 Other income

13,604

Total non-operating revenues 24,000 32,357 GROSS REVENUES 142,824,000 136,057,414

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*FY 2015 Consolidated Original Annual Budget approved on May 6, 2014.
**FY 2014 financial audit completed. The audit report not released.
***New lottery games being launched during second quarter of FY 2015.

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FY 2015 FY 2014

Original Annual Budget* Consolidated Income Statement**

GA GAME EX E EXPEN ENSES Prize expense 77,125,000 74,060,246 Retailer commissions 9,511,000 8,782,855 On-line vendor fees 2,296,000 2,177,205 Advertising 2,500,000 2,267,772 Ticket vendor fees 1,400,000 1,188,107 Retailer equipment 297,000 345,786 Promotions 291,000 221,036 Shipping and postage 414,000 335,679 Drawing game 140,000 102,880 Responsible gaming 75,000 83,050 Game membership 81,000 43,718 Total game expenses $94,130,000 $89,608,334 4 FY 2015 FY 2014

Original Annual Budget* Consolidated Income Statement**

OP OPERATI TING E EXPENSES Salaries, wages and benefits 4,085,000 3,726,941 Leases and insurance 437,000 423,932 Utilities and maintenance 455,000 448,166 Depreciation and amortization 287,000 188,505 Professional fees 206,000 186,035 Other expenses 115,000 69,711 Materials and supplies 121,000 135,260 Travel 140,000 61,980 Operational reserve fund

267,000

Total operating expenses 5,846,000 5,507,530 OPERATING INCOME 42,824,000 40,909,193 NET INCOME $ 42,848,000 $ 40,941,550

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FY 2007 FY 2008 FY 2009 FY 2010 GROSS REVENUES $ 148,793,062 $ 147,807,335 $ 142,564,565 $ 143,605,806 Total Salaries and Wages $ 2,688,945 $ 2,563,597 $ 2,716,754 $ 2,621,468 Salaries and Wages % to Gross Revenues 1.81% 1.73% 1.91% 1.83% Change in Salaries and Wages from Prior Fiscal Year $ (125,348) $ 153,157 $ (95,287) Average Number of Employees 68 52.5 55 55 TOTAL OPERATING EXPENSES $ 5,781,829 $ 5,272,119 $ 5,393,674 $ 5,010,629 Operating Expense % to Gross Revenues 3.89% 3.57% 3.78% 3.49%

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FY 2011 FY 2012 FY 2013 FY 2014 GROSS REVENUES $ 135,576,662 $ 133,855,535 $ 141,814,113 $ 136,057,414 Total Salaries and Wages $ 2,592,511 $ 2,675,583 $ 2,704,968 $ 2,800,467 Note A Salaries and Wages % to Gross Revenues 1.91% 2.00% 1.91% 2.06% Change in Salaries and Wages from Prior Fiscal Year $ (28,956) $ 83,072 $ 29,385 $ 95,499 Note A Average Number of Employees 53 55.5 55.5 54.5 Note A: $165,000 is included in FY 2014 for the payout to a former employee; without this amount, Salaries and Wages would be $2,635,467.42, or 1.94% of Gross Revenues, and a $69,500.82 reduction in Salaries and Wages from fiscal year 2013. TOTAL OPERATING EXPENSES $ 4,975,089 $ 5,146,244 $ 5,080,047 $ 5,507,530 Operating Expense % to Gross Revenues 3.67% 3.84% 3.58% 4.05% 6

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*Cost of Product includes: On-line vendor fees, advertising, ticket vendor fees, retailer equipment, promotions, shipping and postage, responsible gaming, game membership and drawing game

costs. By statute, the Lottery is required to return a minimum of 50% of proceeds to players in the

form of prizes and 30% to the Lottery Tuition Fund. The remaining funds are allocated to cover the cost of product as well as prizes, retailer commissions, and administrative costs.

Numbers are rounded

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⟡ Me Media ia B Buy uys: Approximately $900,000 in added value. ⟡ Inst nstant nt t tic icket c cont ntra racts: Using existing contracts more

effectively, including successful re renegotiatio ion o

f be

better pric pricin ing

p
pti

tions

ns f

for

r printi

nting instant tickets.

 Saved over $90, $90,000 by paying a per thousand fee for two $5 games and one $20 game  Six License games at no cost – $200 $200,000 savings in license fees  Reduced the fees from some special features on games  New pricing for % of sales – cost saving

⟡ In

In-ho house se a anim nimator:

 Estimated $7,000 savings per : TV 15 spot  Estimated $150,000+ savings annually  In the last 6 months, has created more than 14 TV spots: $98,000 in estimated savings  Time Savings

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SLIDE 9

 Bac

Back O Office ice S System Mig Migra ration:

This provides the lottery with a dual data center

architecture with fully redundant processing in two separate locations.

 Initial cost saving of approximately $137,500  Annual savings $268,000 (human resource and system).  Additional, staff cost savings are undetermined at this

time. Two positions have been eliminated.

 Drawing

ing A Automat atio ion:

Annual Cost savings of approximately $50,000 the first

year and 150,000 in subsequent years.

 Eliminated maintenance and upgrade cost for equipment  Eliminated cost of external auditors  Eliminated overtime compensation for evening and Saturday draws

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SLIDE 10

Jackpot s

pot signage ge:

New cost-effective electronic jackpot signs purchased to replace
ld, outdated, high maintenance signs. Annual savings of

approximately $24,000.

Pick

k 3: 3: (Budgeted $4.2 million for sales in FY14)

Added a midday drawing in the fourth quarter of FY14, resulting

in a 9.6% increase from FY13.

Tracking for the first quarter in FY15 (as of 10/14/14) shows a

28% increase to date over FY14 ($291,000)..

Reta taile iler C Cre redit: dit:

Discontinued a practice of crediting retailers for online damaged tickets. Retailers must now seek a credit per event.

Organiz ization tional R l Restructu turin ring: g:

Restructuring of divisions, functions, and staff.

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 Nati

tion

nal Lo

Lottery ry D Dra raw Game ames

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 $5 game with

$15 – $25 million top prize

 Making more

and more millionaires

 Three ways to

become a millionaire

 Payout 50%

$2 jackpot

game

Jackpot starts at

$40 million

Always win

something by matching the Red Powerball

Add Powerplay

for $1 and multiply the prize won by 2X, 3X, 4X or 5X

Payout 50%
$1 jackpot

game

Jackpot starts at

$20 million

Always win

something by matching the Gold Ball

Add the

Megaplier for $1 and multiply prize won by 2X, 3X, 4X, or 5X

Payout 50%
$1 jackpot game
Jackpot starts at

$1,000,000

Always win

something with the Hot Ball

Add Sizzler for

$1 and triple the prize won

Payout 50%

SLIDE 13

October 6, 2014 POWERBALL Member Lottery FY14 Sales FY14 YTD Sales (28 draws) FY15 YTD Sales (28 draws) YTD FY15 Sales compared to Total FY14 Sales YTD FY15 Sales compared to YTD FY14 Sales AR $ 28,989,404 $ 11,082,678 $ 5,228,240

81.96%
52.83%

AZ $ 108,142,840 $ 39,128,110 $ 19,327,996

82.13%
50.60%

CO $ 70,212,862 $ 26,006,120 $ 13,935,702

80.15%
46.41%

CT $ 73,356,102 $ 27,789,402 $ 13,955,286

80.98%
49.78%

DC $ 13,411,912 $ 5,047,872 $ 2,592,614

80.67%
48.64%

DE $ 25,449,162 $ 9,832,730 $ 4,844,520

80.96%
50.73%

FL $ 427,422,582 $ 152,234,122 $ 78,032,662

81.74%
48.74%

IA $ 54,750,918 $ 19,897,658 $ 10,750,980

80.36%
45.97%

ID $ 33,777,676 $ 11,935,236 $ 6,966,468

79.38%
41.63%

IN $ 98,799,814 $ 36,861,110 $ 18,955,304

80.81%
48.58%

KS $ 39,412,956 $ 13,932,584 $ 8,084,920

79.49%
41.97%

KY $ 75,647,228 $ 27,313,666 $ 15,080,640

80.06%
44.79%

LA $ 93,562,316 $ 34,366,238 $ 18,332,920

80.41%
46.65%

MD $ 101,131,274 $ 37,173,752 $ 19,471,596

80.75%
47.62%

ME $ 18,166,162 $ 6,415,956 $ 4,184,816

76.96%
34.77%

MN $ 77,459,146 $ 29,283,878 $ 15,054,494

80.56%
48.59%

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SLIDE 14

MO $ 98,005,426 $ 36,209,762 $ 18,823,864

80.79%
48.01%

MT $ 13,501,858 $ 4,690,932 $ 2,869,792

78.75%
38.82%

NC $ 132,302,550 $ 48,889,372 $ 25,739,884

80.54%
47.35%

ND $ 10,368,600 $ 3,643,144 $ 2,330,654

77.52%
36.03%

NE $ 37,887,516 $ 12,957,236 $ 7,849,738

79.28%
39.42%

NH $ 33,167,264 $ 12,605,980 $ 6,792,934

79.52%
46.11%

NM $ 31,138,038 $ 11,367,472 $ 5,976,994

80.80%
47.42%

OK $ 48,570,056 $ 18,168,320 $ 8,889,108

81.70%
51.07%

OR $ 41,232,842 $ 15,483,258 $ 7,651,124

81.44%
50.58%

PA $ 274,559,638 $ 107,695,294 $ 50,944,650

81.44%
52.70%

PR $ - $ - $ 1,202,220 100.00% 100.00% RI $ 28,888,634 $ 10,560,474 $ 5,880,038

79.65%
44.32%

SC $ 77,976,916 $ 27,216,676 $ 16,161,414

79.27%
40.62%

SD $ 14,738,414 $ 5,353,386 $ 2,943,438

80.03%
45.02%

TN $ 89,011,870 $ 32,058,424 $ 16,889,794

81.03%
47.32%

TX $ 230,006,716 $ 87,247,012 $ 43,323,966

81.16%
50.34%

VI $ 2,409,104 $ 798,656 $ 465,242

80.69%
41.75%

VT $ 8,021,196 $ 2,868,662 $ 1,733,870

78.38%
39.56%

WI $ 81,521,922 $ 31,231,968 $ 15,659,022

80.79%
49.86%

WV $ 37,291,122 $ 13,078,764 $ 7,740,122

79.24%
40.82%

WY $ - $ - $ 1,268,164 100.00% 100.00% CA $ 472,778,248 $ 184,145,468 $ 84,815,314

82.06%
53.94%

GA $ 127,308,140 $ 48,338,536 $ 24,195,608

80.99%
49.95%

IL $ 154,539,428 $ 62,695,592 $ 27,473,384

82.22%
56.18%

MA $ 101,716,904 $ 41,555,628 $ 21,369,540

78.99%
48.58%

MI $ 124,146,110 $ 49,104,008 $ 23,691,910

80.92%
51.75%

NJ $ 224,556,396 $ 93,959,194 $ 36,105,618

83.92%
61.57%

NY $ 381,959,710 $ 156,004,440 $ 62,187,890

83.72%
60.14%

OH $ 112,488,984 $ 44,403,640 $ 21,045,812

81.29%
52.60%

VA $ 106,253,794 $ 40,237,020 $ 20,455,030

80.75%
49.16%

WA $ 54,355,612 $ 20,809,840 $ 9,934,046

81.72%
52.26%

$ 4,490,395,362 $ 1,711,679,270 $ 837,209,342

81.36%
51.09%

14 October 6, 2014 Member Lottery FY14 Sales FY14 YTD Sales (28 draws) FY15 YTD Sales (28 draws) YTD FY15 Sales compared to Total FY14 Sales YTD FY15 Sales compared to YTD FY14 Sales

SLIDE 15

New Mexico Draw Games
Best Odds

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SLIDE 16

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 $1 jackpot

game

 Jackpot starts

at $25,000

 Win by

matching 2 or more of the 5 white balls

 Payout

approximately 55.38%

$1 game with

$500 top prize

Win by

matching 3 numbers

STRAIGHT

(exact order)

$500 Prize
BOX (any order)
$160 prize
STRAIGHT/BOX

(split between exact and any

rder)
$40 prize
Payout

approximately 59%

Combines the

instant play style

f Scratchers

with tickets printed at the terminals like

ther draw

games.

$1 and $2

games have low top prizes of $100 - $200

$5 Red Hot

Jackpot Bingo has a rolling jackpot that starts at $1,000

Payout

approximately

57.33%

$2 game with

two ways to win

It is a Bingo

game with an added bonus – Your Lucky Numbers

Top prize

$10,200

Payout

approximately 62.80%

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SLIDE 18

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 Top Prizes range

between $500 up to $5,000

 13 games launched

FY14 - 16.1% of total sales

 Average Payout

55.73%

Top Prizes range

between $7,000 and $20,000

10 games launched

in FY14 – 13.87% of total sales

Average Payout

57.62%

$1 Ga Games $2 Ga Games $3 Ga Games

Top Prizes range between

$25,000 and $35,000

Extended play games like

Crossword and Bingo

Crossword players very

loyal

10 games launched in

FY14 – 22.49% of total sales

Average payout 57.94%

SLIDE 19

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

Top Prizes range between $50,000 and $70,000



10 games launched in FY14 – 25.41% of sales



Average payout 60.34%



Best selling price point

Top Prizes between

$500 and $100,000

5 games launched in

FY14 – 12.31% of total sales

Average payout 65.12%

$5 Ga Games $10 Ga Games $20 Ga Games

Top Prize between

$200,000 and $250,000

1 game launched in

FY14 – 9.82% of total sales

Average payout

68.13%

SLIDE 20

Sta

Start rted d in M Mar arch ch- Sc Scra ratc tchers rs lau aunch ch on

nce a

a mon month th on

n

a Tu a Tues esday ay

FY15 s

15 scr crat atcher sal ales es ar are e up $1, 1,781, 781,673 673 –9. 9.05% 05% increa ease e

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SLIDE 21

FY FY 13 Avera rage Sc Scra ratcher pa payout by by Bor

rder S

Sta tates tes: P Poten

tential L

Lost

st Sales

es

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*FY14 Payouts not available. NM FY14 Payout 60.05%.

SLIDE 22

Annual nnual bu buys vs. Spo pot bu buys – saves time and money Negotiated at year start vs. prior to each campaign Strengthens media partnerships Additio ional nal promotio ional a nal and ad suppo pport-

Negotiated lower cost and zero cost digital, radio and TV spot banks Promotions included Additional unsold media airs at zero cost

MORE E media for LE LESS SS ad dollars ars-

TV: Approx. 3,900 spots in FY14 vs. 6,700 spots in FY15 Radio: Approx. 36,000 spots in FY14 vs. 56,000 spots in FY15 Ability to flight multiple campaigns at same time Ability to flight unlimited campaigns during Fiscal Year

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 Buses  Railrunner  In-Store Radio Announcements

2 per hour during business hours
All New Mexico Smith’s and Albertson’s stores

 Digital Outdoor Billboards  New Event Sponsorships

AIBF Balloon Banner, Gildan NM Bowl,

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SLIDE 24

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SLIDE 25

 The largest, most diverse generation in the U.S.

population.

 Have been shap

aped ed b by y technology

logy.

 Value community and family.  Are heavily influenced by their peers.  Shop differently and more frequently.  Seek val

alue an e and re rewards rds, but will pay extra to support a charity.

 The convenien

ence ce of shopping online is very important.

 They do not shop with cash.

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SLIDE 28

“Th The mobi mobile revolu

luti

tion

n has

as been en du dubbe bbed by by man any as as the he tr trill illion ion dol dolla lar revolu

lution

tion. From rom ne news ws con

nsumption

mption, to to ph photo

to

sha haring ng, to to ga gamin ming, g, to to hailin iling a ca cab to to de depos posit itin ing a ch check eck, ev ever ery mom moment has as become

me a mobil

mobile mome moment.”

– Flurry

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SLIDE 29

 As of January 2014

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SLIDE 30

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32 lotteries offer responsive design or mobile website 19 lotteries offer a mobile app with 6 coming soon

SLIDE 31

 82% of all lottery sales occur at “C” stores

(convenience stores)

 73% of all “C” store customers never enter the

building (NACS).

 Obser

ervati ation

n:

: the lottery has to expand its sales base from traditional retail solutions to more mobile solutions to remain relevant with future customers.

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SLIDE 32

Ena nabl bles es th the sale le of

f lotte
ttery at

at ATMs Ms an and oth

ther unm

unmanned nned PO POS dev devices

es. This

is repr epres esent ents an an ext xtrem emel ely cost

st effe

ffect ctive tool tool fo for lotte

tteries to

to reach ach new new custome

stomers. By

By le levera ragin ing exi existing ng ki kiosks ks in in th the fie ield ld, lo lotterie ries can can ma massi sive vely expa expand nd thei heir re retail il footp

otprint at

at very ry lit ittle le cost

st. Ga

Games such ch as as Meg Mega Mil illio lions an and Po Powerb rball ll are re

ffe

ffered on

n thes

hese termin inals ls. Californ rnia ia an and Misso ssouri lotte

tteries pla

lan to to sell ll at at th the pum pump. Mi Minnes nnesota rea ealized zed a 3% in in-st stor

re lif

lift in in additi tion

n to

to sale les at at th the pum pump.

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SLIDE 33

 Se

Section 6-24 24-24B

4B. “30% return requirement and

quarterly transfers to lottery tuition fund”.

 Suggestion (item B.):

“B. No later than the last business day of each month of January, April, July, and October, the authority shall to the extent practicable, transmit at least twenty-seven percent of the gross revenue of the previous month until December 31, 2008 and at least thirty percent of the gross revenue of the previous month quarter thereafter to the state treasurer, who shall deposit it in the lottery tuition fund.”

 Lotteries bench mark their sales success based on per capita

sales. This type of formula provides a state-by-state

comparison.

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SLIDE 34

 Of 42 U.S. Lotteries Louisiana, New Mexico, and

Oklahoma are among the nation’s worst in per capita sales for scratchers. All have required percentage returns.

Louisiana ($35)

#37 PC Ranking

New Mexico ($34)

#38 PC Ranking

Oklahoma ($23)

#41 PC Ranking

 “Massachusetts State Lottery is the most successful lottery

in the nation . . . Top lottery officials from Mas assach achus usetts, New ew Yor

rk, Flo

lori rida, a, Te Texas as, and and Geor eorgia have recently stated that higher payouts were instrumental in increasing revenues and generating additional funds for their beneficiaries.” Increase Lottery Sales and Funding to Public Education, California

Performance Review GC06.

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SLIDE 35

US FY13 instant PC US FY13 instant PC Rank

Pop. (M)

PC Sales Rank

Pop. (M)

PC Sales 1 Massachusetts 6.6 $503 22 Michigan 9.9 $83 2 Georgia 9.9 $265 23 Maryland 5.9 $83 3 New York 19.6 $190 24 Rhode Is. 1.1 $81 4 Connecticut 3.6 $186 25 California 38 $79 5 Pennsylvania 12.8 $181 26 Colorado 5.2 $71 6 South Carolina 4.7 $171 27 Idaho 1.6 $68 7 New Jersey 8.9 $166 28 Minnesota 5.4 $68 8 Florida 19.3 $157 29 Arizona 6.6 $67 9 New Hampshire 1.3 $145 30 Iowa 3.1 $66 10 Illinois 12.9 $137 31

W. Virginia

1.9 $59 11 Missouri 6 $126 32 Wisconsin 5.7 $57 12 Ohio 11.5 $124 33 Delaware 0.9 $53 13 Texas 26.1 $123 34 Washington 6.9 $52 14 Maine 1.3 $123 35 Nebraska 1.9 $45 15 Arkansas 2.9 $120 36 Kansas 2.9 $44 16 Kentucky 4.4 $119 37 Louisiana 4.6 $35 17 Vermont 0.6 $119 38 New Mexico 2.1 $34 18 Virginia 8.2 $108 39 South Dakota 0.8 $30 19 North Carolina 9.8 $104 40 Oregon 3.9 $30 20 Indiana 6.5 $94 41 Oklahoma 3.8 $23 21 D.C. 0.6 $92 42 Montana 1 $17

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SLIDE 36

 Sec

ecti tion 6 6-24 24-19

19. “Procurement Code Provision”

 Suggestion (second sentence):

“The authority shall conduct its own procurement, but the authority shall conduct all procurement in accordance keeping with the general principles of the procurement code; however, contract periods for instant ticket printing and computer gaming systems may be of a longer time period and be continued

r

extended to achieve maximum pricing efficiencies but contract periods may not exceed ten years [13-1-28 NMSA1978].”

 Without a change to this section, pricing for major vendor contracts will substantially increase. The lottery needs a ten year period to receive best

pricing. (7 year base plus 3 extension years).

 JEFFERSON CITY, Mo. (AP). The Lottery Commission on Thursday approved a new computer gaming system contract with GTECH for 4.2% of sales. Vendor received 4.4 percent in its previous contract. October 10, 2014. Intralot Gaming (draw system contract): 1.5% of net sales. GTECH (primary scratcher contract): 1.55% of net scratcher sales.

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SLIDE 37

 Secti

tion

n 6

6-24-8. Adoption of rules by board.

Suggestion (item G.):

 “G. the method to be used in selling tickets, which may include the use of the internet, mobile devices or cellular devices, cable television and electronic or mechanical devices and systems;”

 Secti

tion

n 6

6-24-15. Lottery ry t tic ickets, s sale les.

Suggestion (item D.):

“D. Tickets may be purchased only with cash, or a check

r debit card and shall not be purchased on a credit card,

unless the lottery purchase is twenty dollars or less.”

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SLIDE 38



The bill lowers Pennsylvania's statutorily required profit margin from 27 percent of all Lottery sales at present, to 25 percent.

 

That may sound counter-productive, but Lottery Executive Director Sylvan Lutkewitte III has said lowering the profit margin lets them give players better odds of winning. Better odds and more prizes for players, he contends, spark interest in the games and grow sales, ultimately resulting in more revenue for the Lottery and the senior services it supports.

 

In a brief interview after the House vote Monday, Lutkewitte said that with the bill's passage "we can start to plan on adjusting and increasing our payouts on our instant ticket portfolio really immediately."

 

But given the need to play through games that are already in circulation, Lutkewitte added, it could be several months till tickets with the sweeter odds are on the street.

 

The change in the profit margin alone, Revenue Secretary Dan Meuser added, should increase the lottery's return to the state by $7 million in fiscal 2015-16; $13 million in 2016-17; and $20 million annually by 2017-18.  With no action on the profit margin, the Lottery's profit floor was

scheduled to rise to 30 percent next July, which h Meuse ser said id would ld have t tra ransla lated in d into major r re redu ductio ions in in tic icket s sale les and d pro profit its over the next five years.

 Faced with demographic projections that indicate significant

demand in growth for senior services, Corbett Administration

fficials have put a premium on trying to grow lottery profits.



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